Abstract

Medicaid expenditures account for a sizeable proportion of U.S. GDP - $360.3 billion in 2009 or 2.55 percent of GDP. Despite this, the Affordable Care Act of 2010 (i.e. the new Obama healthcare initiative) further expands eligibility criteria for the Medicaid program. However, there is little literature on the effect on healthcare spending from earlier expansions of Medicaid such as the introduction of the SCHIP program. Moreover, the effect of welfare reform (i.e. Personal Responsibility and Work Opportunity Reconciliation Act of 1996) on Medicaid spending has received little attention. Using panel data from all 50 U.S. states for the period 1990-2004, we find that adding one person to the SCHIP rolls in a state that has established an SCHIP program in Medicaid raises real Medicaid spending about $4,100. However, we find evidence that additional SCHIP enrollments also affect non-Medicaid health spending. Thus, the total costs of insuring these patients are significantly higher (about $7,700). For states that have established Medicaid-combined programs, adding one person to the SCHIP rolls raises real healthcare spending about $1,800 after two years. Finally, we find that welfare reform reduced annual Medicaid expenditures by about $1.2 billion and total healthcare spending by about $2.5 billion.

Item Type:

MPRA Paper

Original Title:

Effects of welfare reform and the state children’s health insurance program on medicaid and total health expenditures

Amirkhanyan, A., Kim, H., Lambright, K., 2008. Does the Public Sector Outperform the Nonprofit and For-Profit Sectors? Evidence from a National Panel Study on Nursing Home Quality and Access. Journal of Policy Analysis and Management, 27: 326–353.

Baicker, K., 2001. Government Decision-Making and the Incidence of Federal Mandates. Journal of Public Economics 82: 147-194.

Ham, J., Shore-Sheppard, L., 2005. The Effect of Medicaid Expansions for Low-Income Children on Medicaid Participation and Private Insurance Coverage: Evidence from the SIPP. Journal of Public Economics 89: 57-83.

Kaiser Commission on Medicaid and the Uninsured, 2010. Hoping for Economic Recovery, Preparing for Reform: A Look at Medicaid Spending, Coverage and Policy
Trends: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2010 and 2011, Appendix A-2., Available at: http://www.kff.org/medicaid/8105.cfm.

Skinner, Jonathan, Wennberg, John E. 2000a. How Much Is Enough: Efficiency and Medicare Spending in the Last Six Months of Life. In Cutler, David M., ed. The Changing Hospital Industry (University of Chicago Press, Chicago).